Nevada Plans to Back 15 New Captives by 2010

Nevada insurance regulators approved an application for a new captive insurance company, the first of what officials hope will be 15 new formations in the state by the end of the year.

The new captive from NV Energy will allow the power company to better manage risk and "provide flexibility, better claims management and lower overall cost of insurance premiums," Kirk Cresto, director of risk control for NV Energy Inc. and president of NVE Insurance Co. Inc., said in a statement.

Nevada has 13 other captive applications that have cleared the review process and should be ready for certificates of authority on Dec. 28, said Deputy Insurance Commissioner Mike Lynch. Another remains in the pipeline, he said. The captives stem from a broad range of sectors, including gaming, financial institutions and medical professional liability insurers.

The flurry of new captives do not stem from a stepped-up push to recruit new captives to the state, but are the result of continued growth in the state's 10-year-old captive program, Lynch said. He said Nevada started 2009 as the fifth-largest U.S. captive domicile and are now the fourth, with 125 coming into December. The state offers fast responses to interested captives and no personal or corporate income tax, Lynch said. Captive fees are a 4/10 of 1% tax on gross premiums, with a sliding scale for reinsurance premiums. The minimum assessment is $5,000 and the maximum $175,000; a $5,000 tax credit is offered for the first year, Lynch said.

"We're very competitive on our fees and our premium tax for captives," he said.

The captive sector generated more than $1 million of premium tax and fee income for the state in 2009, according to the Nevada Division of Insurance. Companies have chosen Nevada as a captive domicile include small groups of health care providers, family-owned manufacturing and agricultural companies, trade associations and multistate utility companies. The types of risks captive insurers underwrite include property damage, public and product liability, professional indemnity, employee benefits, employer's liability, motor and medical aid expenses.

Another advantage for the home state of Las Vegas is the requirement that captive insurers hold an annual meeting in their place of domicile, Lynch said. "We certainly have a good hospitality industry to take care of these people when they're," he said.

Competition among domiciles is heating up as U.S. states vie to host insurance companies and their related business, which brings jobs while boosting tax revenue. In 2007, Vermont, the top captive domicile in the United States, and third-largest in the world, said its busy captive market brought in just about as much revenue as the state lottery. About 30 states now have captive laws on their books, giving companies plenty of choice when looking for a place to set up shop (BestWire, Nov. 2, 2009).

(By Sean P. Carr, Washington Correspondent: [email protected])